Does Santa Deliver Presents to Traders Too?
Is the Santa Rally Setting Up This Year?
So, every year, like clockwork, traders ask: Is the Santa Rally happening this time?
Now, the actual definition of the Santa Rally varies:
- Some say it’s the final 5 trading days of December and the first 2 of January
- Others think it’s in the final few weeks of December.
However you slice it, the theme is the same: a strong end to the year in US equities.
It’s one of those seasonal patterns that tends to play out more often than not.
- Holiday cheer?
- Year-end portfolio adjustments?
- Low volumes creating momentum?
Whatever the reason, it can create opportunities…if you’re prepared.
SANTA RALLY
Of course, with any of these seasonal patterns, these are just tendencies.
Nothing is guaranteed, right?
But if you’re a Nas, Dow, or S&P trader I think it’s prudent to pay attention to this stuff…
Here’s how you might make the most of it:
- Filter your trades to align long with the seasonal theme.
- Keep any counter-trend short trades quick and simple (think A-B moves).
- Consider holding longs a bit longer than usual.
- Maybe even set-and-forget?
On the flip side, if everyone’s positioned for a Santa Rally and we see a persistent sell-off, that could trigger some heavy long unwinding.
But hey, the trend is your friend, right?
Whether this is your market or not, it’s interesting to think about.
Here are a few links to dive deeper into the Santa Rally:
Quantified Strategies – Backtesting various different Santa Rally ideas.